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Ever since the eurozone bond markets first started to get the jitters, hedge fund managers have been whispering that gold could play a part in resolving the crisis. Until recently, this discussion has mainly been the preserve of gold market conspiracy theorists and backbench German politicians. But now the use of gold to fund a eurozone bail-out is coming closer to reality...

Central banks made their largest purchases of gold in decades in the third quarter, as a sharp drop in prices in September accelerated the shift to bullion as a means of diversification. The scale of the buying, at 148.4 tonnes on a net basis, was far bigger than previously disclosed, surprising some traders. The data were published in a quarterly report by the World Gold Council, a lobby group for the gold industry, on Thursday.

The WGC declined to identify of the central banks behind the majority of the buying citing “confidentiality restrictions”, saying only that....

Commentary: Europe’s choices: Chaotic breakup or mass inflation

LONDON (MarketWatch) — As the euro struggles from crisis to crisis, it isn’t hard to identify the losers.

Peripheral country bonds have been hammered. Equities have struggled to make any progress all year. The main euro-zone banks have had to make huge write-downs on their holdings of Greek debt and have seen their shares collapse in value as a result. The euro itself has started to fall in value against other currencies, and almost certainly has a lot further to go.

But where are the winners? After all, all that money has to go somewhere....

Gold is seen by most as a safe-haven. If equity markets are in turmoil, “buy gold,” we always hear. Gold bulls are currently predicting gold to move over $2000 an ounce by year end. Some of the gold bull’s thesis goes something like this:

Italy, Greece, and eventually Spain will cause a European end-game scenario. The default of bigger European countries will cause the European Central Bank to force money into the system in the form of a massive bailout, mainly being a dovish monetary policy.

The fears of contagion will spread throughout the continent and harm the economic outlook globally, including much harm to the United States. As the crisis unfolds, investors will flock more to gold than the U.S. dollar, as the United States will be in a similar mess. (This is a quick thesis.)

However ....

Physical gold will outsell ETFs by 500 per cent this year, Standard Bank’s Walter de Wet told the 8th Dubai City of Gold Conference today. Two years ago the position was completely reversed with physical gold sales running at only 20 per cent of ETFs.

‘It’s a complete flip from ETFs to physical gold,’ he said. ‘And it seems to reflect people’s lack of trust in financial systems and the shift in investment flows towards Asia and the Middle East’....

Chinese gold imports from Hong Kong, a proxy for the country’s overall overseas buying, leapt to a record high in September, when monthly purchases matched almost half that for the whole of 2010.

The buying spree follows a sharp drop in the price of the precious metal. After hitting a nominal all-time high of $1,920.30 a troy ounce in September, gold fell to a three-month low of $1,534 an ounce later in the month. Chinese investors snapped up the metal as prices fell....

Whilst many may argue that gold is an inflation hedge and therefore inflation is bullish for gold, in reality the dynamics at play here are not that simple.

In our view, gold is a currency. Therefore fluctuations in its price are largely based on its perceived value relative to other currencies. We would not suggest that its role as an inflation hedge is a primary reason for being long gold, since there are far more direct and efficient ways to hedge against inflation risk in this modern financial environment. We do however see currency devaluation as a primary reason to....

THE ISSUE: The price relationship between gold and platinum reflects continued economic worries, but the historically wide spread of the two metals could signal trading opportunities.

Platinum is about 15 times more rare than gold and usually trades at a premium to the yellow metal. But the greater the worry about the economy, the higher gold trades in relation to platinum.

"The relative performance of these metals is telling us that ....

When it comes to precious metals, palladium may give investors more bang for their buck than its flashier cousins.

The often-forgotten white metal is expected to outstrip gains of both gold and silver again this year, thanks to concerns over supply disruptions and surging car sales in fast-growing Asian countries.

Palladium is mainly used to make catalytic converters to reduce toxic emissions from gasoline-fuelled cars sold in Asia and North America. Its sister metal, platinum, is similarly used in diesel-powered autos sold mostly in Europe, but that market has been weaker, suppressing platinum’s buoyancy.

“Palladium is my top pick among precious metals this year,” said Patricia Mohr, a commodity markets specialist at Bank of Nova Scotia ....

Pollsters at Gallup reckon that one in every three Americans now thinks gold is the best long-term investment, which kind of makes you wonder where the other two U.S. citizens have been investing since the start of last decade.

“Which of the following do you think is the best long-term investment?” asked Gallup in its telephone survey of 1008 adults. You only need eyes to see....